This is according to global A.T. Kearney's 2014 Foreign Direct Investment Confidence Index.
According to the index, South Africa, which was ranked at number 15 in 2013, closed two major deals with international companies BP and Google, signalling a positive FDI trend for the country.
British oil major BP, for instance, announced a 550 million US dollar investment over five years while global search engine Google made its first renewable energy deal with South Africa's Northern Cape Province for 12 million US dollars.
The South African government stated that they are humbled by the ranking as it shows that the country’s strategic partnership with foreign investors is gaining momentum.
(READ MORE: S.Africa's March Business Confidence Index up 0.9 points)
"The report which cites South Africa as the only country in Africa on the list of top 25 countries, demonstrates that our country's blueprint on development is yielding results,” said Phumla Williams, acting chief executive officer of the Government Communication and Information System (GCIS).
(READ MORE: S.Africa top investment destination in Africa but Nigeria close behind)
“South Africa offers lucrative value and opportunities for international investor partnerships, as the country is uniquely positioned as the gateway into Africa. We also boast a distinctive combination of developed first-world economic infrastructure and an emergent market economy that gives rise to a healthy entrepreneurial and vibrant investment environment."
Williams added that the growing interest of international companies to South Africa and its fertile business environment was made possible by the efforts of the country’s President Jacob Zuma.
"South Africa has heeded President Jacob Zuma's call to focus on changing negative perceptions held by foreign investors and thereby attract further investment. Our tax relief incentives, announced in 2011, have also contributed in attracting foreign direct investment. The strengthened synergies between government and other strategic stakeholders, like business, are supporting the National Development Plan as it provides policy certainty for investors," he said.
Williams believes that South Africa's commitment to the Renewable Energy Independent Power Provider Programme is one of the key drivers of its improved index rating. The programme which focuses on increasing electricity supply through renewable energy solutions is also aimed at creating socio-economic and environmentally sustainable growth.
(READ MORE: S.Africa well-positioned to light the way for solar)
"As we celebrate 20 Years of Freedom, South Africans are encouraged to embrace foreign direct investment and join hands with government's initiatives that aim to achieve the country's economic vision. This advancement proves that South Africa is indeed a better place to live in,” he concluded.